Written Assignment Unit 1 : The Transformation of Valio

BUS 5611: Capstone of Management

University of the People

Akash Mathapati (Instructor - Senior)

1. Identify the problem: Is the problem internal, external, or both? Please describe
each problem with research information found outside the case study.
2. Diagnose the cause(s): Describe the root cause for the problem. Does it matter
whether the cause is internal or external? If so, in what ways?
3. Prescribe possible alternatives: The case identifies Valio’s response. Please
evaluate it. Would there be other alternatives available to Valio?
4. Recommend a plan of action (decision/implementation): From the actions
identified in the case, please provide a high-level description of implementation
steps.
5. In addition, each case study response should also state why this case is important
and relevant to a study of business.

Submit a 3-page case paper, (independent of reference page) double-spaced. Paper and
all citations should be in APA format.

Valio is a Finnish company producing diaries; due to various challenges with the high
competition on the market raising a decline in sales and change in the customers' preferences
with an increase of competition, the company needs some transformation. The company needs to
adapt itself to the market demand and growth of the industry to survive on the market.
The case analysis will help us to understand Valio’s response, evaluate potential alternatives that
can be used to address the challenges and implement a plan of action to recommend long-term
success.
The deregulation of the dairy industry in the European Union, the changes in the customers'
preferences, and the increase in competition impacted Valio. The new regulations allowed the
Finnish diaries company to operate in the domestic market after 1995. Valio found itself in a
risky position with losses and a decline in its market shares, and a loss of confidence in
shareholders. The decision the transformation of its operations was important; the change in the
cultural and business approach was needed. The company reevaluates its mission, vision, and
values by elaborating new ones with a focus on its customers than products, and with a focus on
sustainability approach.
A new structure has been established to implement a cross-functional team with a focus to
increase operational efficiency, productivity, and creativity. This approach should enhance the
improvement of the communication channels, training of the staff, development, and
performance with a new management strategy. Schein explains this approach through the
external adaptation and internal integration of the organizational culture to create vision, mission,
strategy, and objectives; but also to define a reward system and common language within the
working environment ( Jorgen Laegaard, 2006).
As an external problem, it is important to identify the legal environment created by the
deregulation of the EU market that led to the pressure of competition from domestic and
international competitors. Before the Finnish market was closed and not accessible to
international competition, these barriers remove was used as an opportunity for big companies in
their internationalization approach to the global market.
As for internal factors, the company was more focused on its products than its customers'
demand. Valio was producing its products to demonstrate its savoir-faire and technology without
considering the demand, the expectation of customers, and needs. To enhance growth, a
company needs to align the customer demand in its strategy to make sure that it can respond to
the demand. The lack of innovation and change in the offer has been demonstrated through the
losses generated by the company as the customers are no more buying their product for various
reasons. The current organization of the company is unstructured with ineffective
communication, a lack of performance strategies, and a lack of standardized workflows. This
organization presents a lack of leadership, organizational structure, and system to enhance the
company’s growth and performance.
According to Daniel Mercier (2020), a regulatory framework was requested to accommodate the
competition and globalization of markets in the European Union. New relations formed between
institutions and legal frameworks established for a global market expansion to enhance
competition and accessibility to market to European companies. Due to various reforms of the
national and regional markets, integration into the global regional market was mandatory.
Thierry and Aurelie (2018) present deregulation as a response to the crisis in the European
markets. - structural and economic crises were established and it was important to find the best
approach to solve the issue founded on the economic theories and practices. The variation in
income and price of companies was due to the macroeconomic climate with a recession due to
tradeoffs in household food expenditures, the meteorological conditions with a reduction or
increase in supply, and a mistake in the anticipation of the demand. Overproduction in the long
term has been created also by the emerging countries that were in an economic slowdown with
the inability to manage the high demand from industrialized countries.
Furthermore, organizational change and development have to go through an adaptation approach
and complex and challenging tasks. Shaffer and Thomson present the change management
program as a result of poor results in a management approach. Change management should
consider new mental models and routines (Clark Starkey, 1988). The need for innovation and
change in the environment can impact the organization. Internal exploratory environment theory
allows to have a safe environment with new products or services and processes adjusted to the
needs (Tushman, O’Reilly, 1996); the environmental change can include a market change with
high risk, competition, the recession of decline, and deregulation. The company needs to use
adaptation to change and suggest a review of a strategic approach to survive. Geroski and Greeg
(1994) suggest using a strategic and adaptation approach to understand the change and plan with
a new view of the strategy that includes business transformation.
Based on the information provided in the case study, the possible alternatives could be for Valio
to :
- Redefined the strategic alliance: drive an economy of scale with a proactive joined force
with local dairy companies to provide more resources and improve their bargaining power,
reduce the cost of production with a various range of product
- Drive innovation: Valio should have invested in research and development to stimulate
production with a more innovative approach and match with the customer demand and
preferences. The usage of emerging technologies will create functional food products with
proven health benefits
- Restructure the business: reduce the cost of operations and create more profitability with a
reduction of the offer by closing non-profitable business units, reduce the headcount, and create
more diversity in the offers with a focus on a high growth market.
- Restructure the organization: A new leadership with a new vision, a different management
approach with simplification and cost reduction focused on profitability and high performance of
the company
- Merger and Acquisition: Evaluate the possibility to merge and acquire other rivals to
improve the service and offers, leverage the strengths, and achieve the growth
Other alternatives like strategic alliance, innovative approach in production with sustainable
products, externalization, and new management and leadership approach.
From the alternative, Valio could use the current plan of action to drive real change within the
organization and drive the new business with a specific approach to the market
To enhance innovation, the company should drive the right approach with the European market
used as an opportunity. Valio should think to expand also on the market where the opportunities
exist in terms of profitability and growth. A differentiation approach with a low-cost approach to
attracting customers should be used as a strategy (Mac Millian,1997). There is no innovation
without research and development; it will be important for Valio to drive the research in the
current market to meet the local demand but also create a product new potential market due to
the EU market opening; via emerging technologies like data analytics and machine learning, the
customers' preference could be anticipated and met. Zara's marketing approach is a great
example to understand how data help to define marketing strategy and meet the internal demand
via anticipation in the production. The best way to restructure the company by cutting costs and
enhancing operations excellence is to outsource non-strategical resources and responsibilities to
third parties. The efficiency could be improved with Valio’s focus on the main competencies and
third parties will manage the externals and additional workload.
The leadership and change in the culture of the company should start with a review of the
company's ways of working, directives, visions, and values, by empowering the employees and
making their voices heard, the company will gain in collaboration, innovation through
transparent communication and improvement with learning, training and development goals in
the employee competencies. While the team members are taking responsibility for their actions
and feeling, leadership become easier, and passing the leadership among the team becomes
easier (David Wright, 2013)
To conclude it is important to understand that a successful company needs to overcome
challenge, adapt to the market realities and drive innovative approach to maintain the business
and enhance the profitability. Valio could explore the alternative solutions and implement the
plan of actions to resist to the crisis and avoid the failure in the transformation. These strategies
will help the company to reinforce its brand, improve its performance and increase the market
shares to achieve the profitability,

REFERENCES

Daniel-Mercier Gouin et Aurélie Trouvé (2020) The variety and limits of dairy policies in a

context of global market deregulation retrieved from

https://journals.openedition.org/regulation/18273#tocto2n3

Geroski, P. A., & Gregg, P. (1994). Coping with recession: UK company performance in

adversity. Routledge. Retrieved from https://docplayer.net/45065178-Organizational-innovation-

and-institutional-change-the-case-of-valio-in-finland.html

Lampros Lamprinakis (2013) The Transformation Of Valio: A Case Study retrieved from

https://my.uopeople.edu/pluginfile.php/1706463/mod_workshop/instructauthors/U1%20-

%20Transformation%20Valio%20%281%29.pdf
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facts for economic interpretation. Studies in Political Economy, 2018, 99 (2), pp.194-212.

ff10.1080/07078552.2018.1492216ff. ffhal-02050761f

Tushman, M. L., & O'Reilly, C. A. III. (1996). Ambidextrous organizations: Managing

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from https://docplayer.net/45065178-Organizational-innovation-and-institutional-change-the-

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Wright, D. (2013). The myths and realities of team work. Bookboon.